KSL - Electrosteel Steels Ltd - Plant Visit Note

We have visited 2.51MTPA integrated steel plant of Electrosteel
Steels Ltd (“ESL”), which is an associate company of Electrosteel
Castings Ltd (“ECL”) in Bokaro, Jharkhand. The total cost of
project stands at INR 95.6 bn out of this INR 90.0 bn has been
incurred till date. 95% of total capacity is near completion stage,
few of the major capacities have already commenced production
such as 350m3 Blast Furnace, 1.2 MT Sinter Plant, 1.0 MT Coke
Oven Battery are running smoothly. The total capacity will be
focused on long product, as company expects the demand to
continue higher than flat product. The product mix includes wire
rod, TMT bars, ductile iron (DI) pipes, billets and pig iron. On
the mining side ESL has signed a contract with its parent
company ECL to supply coking coal and Iron Ore at cost plus
20% margin basis. The coking coal mine has already started
producing and has produced 150000 ton, in FY2012. Company
expects coking coal mine to take another 12 months to start
production in full swing, whereas on iron ore front ECL is
awaiting Forest stage-II clearance. Company expects the
production to start from the iron ore mine within three to six
months of signing a mining lease after it gets all necessary
clearances. Although the company is hopeful to start production
from March 2013, we believe it is currently challenging to
estimate the timelines for completion of clearance formalities.
Key Highlights
 Full Integration to give benefit at every stage: ESL’s 2.51
MTPA steel plant is fully integrated i.e. starting from raw
material to finished good. On backward integration side ESL
has signed a 20 years contract with its parent company for
supplying both Coking coal and Iron ore at cost plus 20%
margin basis whereas on power side, Company is setting up
a captive 120 MW WHRB which would fulfill 75% of total
requirement. We believe this iron ore; coking coal and power
constitutes approximately 65% of total raw material cost. On
forward integration side company has set up wire rod, TMT
bar and DI pipe plant. We believe this both backward and
forward integration will catch profitability at every stage and
increase the margin. Company expects comfortably to
achieve an EBITDA/ton of INR 13000/ton after all capacities
on stream.

ELECTROSTEEL STEELS: Chinese equipment & engineering enable savings in capital cost; Motilal oswal,

ELECTROSTEEL STEELS: Chinese equipment & engineering enable savings in capital cost

Phase-wise trial runs on at 2.5mtpa ISP; watch for plant efficiency on full-scale operations

-      We visited the 2.5mtpa integrated steel plant (ISP) that Electrosteel Steels (ELSS) is setting up at Siyalijori village, near Bokaro in Jharkhand.

-      It is India's first steel plant based almost entirely on Chinese equipment and engineering, enabling savings of 20-25% on capital cost. The total project capex is INR96b, of which INR87b has already been incurred. Most facilities are complete and trial runs are being carried out.

-      Parent, Electrosteel Castings (ELSC) will supply 30% of the coking coal and 100% of the iron ore requirement on cost plus 20% for 20 years. This will help ELSS to save on raw material cost, too. ELSC has begun partial production at the coking coal mine and is awaiting stage-II forest clearance for the iron ore mine.

-      ELSS targets 1.5m tons of saleable steel production in FY14 and expects EBITDA margin of 35% on full-scale operations. As at end-FY12, D/E was 3.2x. The stock trades at 0.9x FY12 BV. Not Rated.

Electrosteel Steel Limited - Interview ( DD Sharma) - YouTube

DD Sharma interview on Electrosteel Steel Limited in You Tube

http://www.youtube.com/watch?v=d1InnuukbuY

Electrosteel Castings - Near term pain with long term gain...Networth Capital

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Kolkata based Electrosteel Castings Ltd (ECL), is India’s largest Ductile Iron
Pipe manufacturer catering chiefly to the Government and Urban Local
Bodies in the transportation of drinking water & sewerage on domestic
market front besides fulfilling the requirement of overseas market. ECL also
executes DI pipe related EPC projects on a turnkey basis
Investment Rationale
Water infra thrust to boost demand
The XIth 5‐year plan saw an investment of ~Rs1tn in the water infrastructure
space. The Government has emphasized the investment in the sector in
increased vigour during the XIIth plan as well. The industry is expected to
sustain a growth of 15% CAGR for FY12‐13e.
Captive coking coal and iron ore mining will boost margins
With the start of coking coal mining along with coal washery facility, the
company would be able to obviate the raw material volatility seen in recent
times. We estimate ~15% and 10% cost reduction in the coke in FY12e and
FY13e respectively. Further, in FY13e, the iron ore mining is expected to feed
the entire requirements of ECL, which will further reduce the cost. We
estimate ~50% reduction in ore cost on such development.
JV for Non‐coking coal remains positive upside
ECL has entered into a JV with Domco Pvt Ltd for prospecting of non‐coking
coal, which would feed partially to its sponge iron plant at Haldia. ECL has
49% stake in the venture. The balance production is planned to be sold in the
market. Also, ECL is developing dolomite mines allocated to it, which will be
partially routed to the production of sponge iron and pig‐iron. However, we
have not accounted for any upside from Non‐coking coal and dolomite
mining.
Key Investment Risk
 Delay in development of Iron ore mining
 Disruption of iron‐ore supply from Orissa
 Significant price rise in imported coking coal
Valuation – strong upside potential
We aver that 2012E would pan out to be a difficult year for all ferrous
companies (sans RM linkage) considering the tight situation prevailing in the
raw material side. But situation is expected to subside for the better in FY13E
on benefits accruing from ECL’s own mining. ECL is trading at PE of 5.6x and
EV/EBITDA of 7.6x of its FY11 earnings. We expect the company to post an
EPS of Rs.10.5 for FY13e. Based on 4x FY13e EPS, we arrive at one year price
target of Rs.42 giving 62% upside from the current market price.

Electrosteel Castings (CMP: `41/ TP: `72/ Upside: 76%): Angel Broking Top Pick

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Electrosteel Castings (CMP: `41/ TP: `72/ Upside: 76%)
􀂄 Electrosteel’s (ECL) backward integration initiatives through coking coal mine at
Parbatpur (Jharkhand), which is already operational, is expected to result in
expansion of EBITDA margin by 329bp over FY2010-12E.

IPO allotment Details for Electro Steel

CLICK here for IPO allotment Details for Electro Steel

ELECTROSTEEL STEELS - IPO oversubscribed 8.2x; HNI 28.6x; Retail 6.2x

ELECTROSTEEL STEELS LIMITED

Total Issue Size	225516188
Total Bids Received	1856319600
Total Bids Received at Cut-off Price	372953400
No. of times issue is subscribed	8.23

Sr.No.	Category	No.of shares offered/reserved	No. of shares bid for	No. of times of total meant for the category
1	Qualified Institutional Buyers (QIBs)	135309713	792678600	5.86
1(a)	Foreign Institutional Investors (FIIs)		327211200
1(b)	Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)		243555600
1(c)	Mutual Funds		125322000
1(d)	Others		96589800
2	Non Institutional Investors	22551619	644553600	28.58
2(a)	Corporates		470014200
2(b)	Individuals (Other than RIIs)		174427200
2(c)	Others		112200
3	Retail Individual Investors (RIIs)	67654856	419087400	6.19
3(a)	Cut Off		372953400
3(b)	Price Bids		46134000

Updated as on 24 September 2010 at 1900 hrs

MS Advisory and PMS: IPO Recommendations: Avoid: Gallant Ispat, Orient Green Power and Electro Steel

MS Advisory and PMS: IPO Recommendations:

Avoid: Gallant Ispat, Orient Green Power and  Electro Steel - All 3 IPOs ending on September 24th (Friday)